The way we do business has fundamentally changed.
Business is no longer about one-time transactions. It's about an ongoing relationship with your customers.
The Subscription Economy is built on ever changing relationships with your customers. And the longer and stronger you can build these relationships, the more opportunities you get to drive up recurring revenue. For example, you can move customers from a free to a paid version, add a new service, upgrade those services and finally renew to start the cycle all over again. It's a great business model. But it's easier said than done. Subscriptions introduce a new set of challenges across every industry and every line of business. There's a new set of rules for success in the Subscription Economy.
“By 2015, 35% of Global 2000 companies with non-media digital products will generate incremental revenue of 5% to 10% through subscriptionbased services and revenue models.” - Gartner
With the Subscription Economy, comes a whole new set of rules, fundamentally changing the way successful businesses are built and run.
Success used to be tied to the number of products you sold. That's why traditional ERP systems were architected to be product centric. It's all about the one-time transaction. Sure, they can tell you how many units you've shipped, but good luck trying to understand how many active customers you have.
Today, great businesses are built around customer acquisition and retention, so you need a customer centric view of the world. You need insight into customer metrics, not just transactional metrics...things like customer growth rate, MRR, TCV and churn. You need a system that understands that the customer, not the SKU, sits at the core of your business.
Pricing used to be a lot easier...one price, one SKU. And traditional ERPs & GLs evolved to support this model. But SKU-based product catalogs fall down when you're launching recurring and usage based services. Before you know it, you're creating different SKUs for every month of the year. 'January Service' anyone?
With the right pricing strategy, you'll attract more customers and keep your competitors on their heels. That means combining one-time, recurring, and usage based charges. You'll need flexible subscription terms, from monthly to annual options. Then layer on pricing tiers, free trials, freemium editions, and time-based discounts. Only a plan based pricing catalog can handle this complexity.
Traditional ERPs and GLs work great if you're shipping boxes. That world is all about the 'transaction.' It's sell, ship, bill, and then onto the next order. So legacy technology comes with a 'Buy' button...but what about the add-on, the upgrade and they renewal? Those concepts simply don't exist.
The Subscription Economy is all about an ever-changing customer life cycle. To be successful, you need the tools to help shepherd your customers from a free trial to a premium offering to a renewal...all while keeping track of their value over time. The 'Buy' button has been replaced by the 'Subscribe', 'Upgrade', and 'Renew' buttons.
It used to be that you sold either to consumers, or you sold to businesses. You either had a low-touch, low-complexity, high-volume B2C business...or you sold B2B and operated in a high-touch, high-complexity, low-volume environment. But that was then...
The most successful companies in the Subscription Economy have found a way to sell to anyone. From consumers, to groups of business people, to small businesses, to the largest enterprises. To be successful, you need the tools to handle both high volume and high complexity challenges. And you need to do it with a single system.
Getting a handle on your financials can make or break a business. You need to know what's going on across bookings, billings, cash, and revenue. All too often, this information is locked away in different applications, and it's impossible to reconcile everything. Bookings in CRM. Billings & Cash in ERP. And Revenue in some combination of spreadsheets.
Unfortunately, managing financials in the Subscription Economy can actually be 10 times harder. You're still tracking bookings, billings, cash, and revenue, but now you need to manage everything over time while subscriptions are constantly changing. Success means a unified view of these interrelated and evolving metrics so you know with confidence when to throttle back.